U.S. soy supply at 48-year low as Brazil ships held

Dry weather and shipping delays in South America are boosting demand for soybeans from the U.S., the world’s largest grower and exporter, and producing the tightest inventories in almost five decades.

Stockpiles will shrink to a nine-year low of 130 million bushels on Aug. 31, before the next U.S. harvest, according to the average of 31 analyst estimates in a Bloomberg survey. Reserves will total 4.2% of demand, the lowest since 1965, U.S. Department of Agriculture data show. The USDA will update its estimates tomorrow.

The drop in supplies will help send Chicago futures up 8.3% to an average $16.16 a bushel through August, Morgan Stanley said in a Feb. 4 report. Prices have climbed 10% from a six-month low on Jan. 11 as drought dimmed prospects for the crop in Argentina and rain left delivery backlogs at Brazilian ports. The countries are the largest shippers after the U.S., where export sales are up 27% from a year earlier, driven by demand from China, the biggest buyer.

“The U.S. does not have the supply to sell more soybeans overseas,” said Dan Cekander, the director of grain-market analysis at Newedge in Chicago, who predicted a rally to $16.50. “Price rationing will have to occur. It may take six months before world supplies are more balanced with demand.”

Soybeans are up 6% this year to $14.935 as of 11:18 a.m. on the Chicago Board of Trade, while the Standard & Poor’s GSCI gauge of 24 commodities gained 4.2% and the MSCI All-Country World Index of equities climbed 3.9 percent. A Bank of America Corp. index shows Treasuries lost 0.9%.

Argentina Cut

For a second straight month, the USDA probably will cut its forecast of production in Argentina to 52.9 million metric tons, compared with 54 million estimated in January, a Bloomberg survey of 23 analysts and traders showed. The country accounts for more than 44% of global exports of soybean meal fed to livestock and soy oil used for cooking and biofuel.

Most fields in Argentina got less than half of the normal moisture since Jan. 1, which makes conditions drier than a drought in 2012 that cut production to a three-year low of 40.1 million tons, according to T-Storm Weather LLC in Chicago.

In Brazil, excess rain in Mato Grosso, the biggest soy-growing state, disrupted inland crop deliveries and may extend the wait time to 50 days for ships to load exports, Hamburg-based researcher Oil World said Feb. 5. There were 135 ships loading or waiting to load soybeans, animal feed or corn on Feb. 5 at the five major Brazilian ports, according to SA Commodities in Santos, Brazil. A year earlier, 67 were waiting.